Procurement collaborations – also known as group purchasing organizations – are the way towards driving profits. By sharing expertise, knowledge, and volume, the benefits of setting up a collective procurement process delivers tremendous value towards your organization’s goals.
However, some may believe that with these gains come substantial costs. With skeptics questioning the value of this process, how can a procurement collaboration prove its adept reputation? Let’s take a look.
Understanding your purchase behavior
Organizations active in procurement collaborations often purchase similar items. For example, pens and printing paper are ones that are most common amongst all organizations. In hospitals, procurement collaborations have even more in common, where each organization purchases similar items such as syringes and gloves.
With these identical and repeating purchases, it is only natural to want to compare prices and find data that proves there are significant cost reductions that can be realized for each of the collaborating partners. However, getting in touch with each of your colleagues at different organizations to ask them what they are paying for a specific product is a time consuming, inefficient process. Going through this process might not even deliver any cost reductions, as your organization might already be paying the least.
How analytics can help
If the procurement data from each organization is standardized, you can compare product prices. The difference between the prices results in the saving potential for a hospital.
If a procurement specialist or manager has that information readily available, a deal with a supplier can easily be renegotiated, backed up by facts and figures.
As one example of this in action, a large procurement collaboration of hospitals in the Netherlands has been able to realize a lot of quick wins by sharing their procurement data. They continue to share their data every quarter and more hospitals are joining the collaboration to share data and reduce costs. One of the hospitals that recently joined managed to save more than $25,000 (USD) in the first week. Analytics offers a cost-effective stepping stone to a stronger and more integrated procurement collaboration.
Each organization has its own financial administration and these are often different products, or it’s the same product, just implemented differently. For our product, Spend Advisor, this is not an issue. This is because we standardize the output of different administrations. Having one organization use SAP and another use Navision does not matter. Simplifying the process from raw data to actionable insight, all the steps in between are done by Spend Advisor. In an intuitive dashboard, the procurement manager/specialist can log in and have direct insight into the savings potential, the related suppliers and items.
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